Fintech has been front page news in Chicago recently as a report from the Global Fintech Hubs Federation (published by Deloitte) ranked the city #5 in the world as a fintech hub. The timing couldn’t have been any better as Fintech Week took place during the last week of April with four consecutive days of events hosted by 1871, Barchart, and Northwestern/Kellogg that covered everything from blockchain to data (and more data). In the end, did Chicago live up to its newfound fame?
Blockchain and Fintech at 1871
The first two days of Fintech Week were hosted by 1871, a hub and showcase for tech start-ups headquartered in the Merchandise Mart, with day one devoted to blockchain and day two focused on more general fintech topics. Both days featured “big” announcements of new initiatives, although some may be more smoke than fire.
The blockchain session was the more heavily attended of the two days and featured a unique mix of public and private participation. In a state that generally tries to put the “fun” in “dysfunction”, branches of state, county, and local Illinois governments are surprisingly ahead of the curve on blockchain. For example, the Cook County Recorder of Deeds is working on a blockchain POC and state officials like Jennifer O’Rourke and Cab Morris are actively encouraging developments in blockchain specifically and fintech more generally. Illinois can definitely use good news like that.
Takeaways from the session included:
- Rumi Morales from CME Ventures described the potential for a PTDL (Post Trade Distributed Ledger) while pointing out that no clear winner is needed right away, using the analogy of the multiple protocols (TCP/IP, HTTP, etc.) that drive the internet as an example of how specialization may evolve.
- Dan Hughes from Radix garnered some buzz. Radix is a next generation DLT that potentially answers many concerns about blockchain, in particular with scale, speed, and security. For example, Hughes talked in terms of a million transactions per second with Radix. Launch is expected late in 2017.
- The VC view from Jack Saba of Day One Investments and Vik Sasi from American Family Ventures was illuminating in a number of ways. Saba described how there is a death of later stage opportunities for investment in blockchain companies, with most being in Angel or Series A. Sasi made a corollary between current blockchain and the early internet, the roots of which came from the late ‘60’s and ARPANET. In his analogy, we’re in 1982 and there is a long, long way to go.
The announcement of the day was the relaunch of the Chicago Blockchain Center (more information here). At this writing, the site is under construction so we’ll have to keep an eye out for this one.
The big announcement on day two had a bit more meat on the bone as FinTEx Chicago announced the June 2 launch of Currency, a fintech epicenter to be housed at a WeWork coworking space. Currency will offer services such as Mentor Matching and a Corporate Accelerator as they look to provide an environment that fosters and nurtures the Chicago fintech community.
Otherwise, there was less attendance and less “sizzle” to day two of the 1871 conference. Companies of note that got a mention included:
- Everledger: blockchain for fine art and other treasures
- Rippleshot: advancements in fraud detection
- Enova: the “grandfather” of Chicago fintech? It was founded in 2004!
- CFX Markets: a secondary market for alternative assets
Fintech Exchange Shines the Brightest
Of the three events during the week, Fintech Exchange was the best attended and had both the greatest energy and the most useful content. Hosted by Barchart.com, the event is now in its third year and it has become a touchstone for the Chicago fintech community.
If the conference could be summed up in one word then that word would be “data”. The keynote speaker was Vaidy Krishnan from Tableau and he described how you can get more from your data by asking “why”. Others who touched on the data theme were:
- Maria Belianina, OneMarketData: A somewhat technical and dry look at tick data management and analytics.
- Julie Menacho, CME Group: It wasn’t all data with Menacho, but a key development at the CME is the introduction of cloud-based historical data through DataMine.
- Sean Naismith, Enova Decisions: The “granddaddy” of Chicago fintech continues to innovate with a platform that helps companies make data-driven decisions.
- Mark Bittman, B23: Combining cloud, big data, analytics, and automation to produce superior results.
- Jim Austin, Vertex Analytics: The most entertaining presentation of the day, Vertex provides tools to manage compliance and regulation requirements for trading firms.
- Justin Dickerson, DataRobot: Bringing the power of machine learning to all data scientists, from beginners to experts.
The final two presentations were somehow out of phase and on the same page at the same time, as Tim McDermott of NADEX discussed the “Return of the Retail Trader” and Michael Patak from TopStepTrader talked about “Retail: The Next Big Thing”. I guess the next big thing has returned. In any case, during the whole session there was nary a mention of microwave towers, algorithms, FPGAs, or high frequency trading the whole day. The trading industry has evolved from “all speed, all the time” to “insight”.
The View from Academia
Fintech Week in Chicago ended with a view from academia as Northwestern/Kellogg hosted a “Fintech and the Future of Finance” gathering at their brand-new Global Hub on their Evanston campus. While the quality of the speakers was high, the energy and innovation paled in comparison to the 1871 and Barchart events.
Leading off was Thomas Curry from the Office of the Comptroller of the Currency. While his remarks were somewhat better than average for the head of a government agency they ultimately failed to ignite the imagination. The blockchain panel, on the other hand, with Sanjay Gupta of C2FO, Caitlan Long from Symbiont.io, and Peter Cherecwich of Northern Trust, was both relevant and interesting. On the face of it, the trio seems to be an unlikely group but their experiences and points of view were complementary. C2FO has been around longer than Bitcoin (2008 v. 2009) but their network of delivering working capital on a global scale mirrors the promise of blockchain, while Symbiont is pushing the development of smart contracts using distributed ledger technology. Northern Trust ties it all together as the first company to deploy blockchain in the private equity market (you can read more about it in the Maven Wave blog post, “Ready for Takeoff: Blockchain in Financial Services”).
The final two panels of the day focused on the lending market and portfolio algorithms. On the former subject, Suk Shah from Avant Credit demonstrated how a fintech company succeeds as he described their commitment to technology and their customers. These twin commitments have led them to recently white-labeling their consumer credit application with Regions Bank and they expect to have more alliances in 2017 and beyond. Another impressive panelist was Steven Chaouki of TransUnion. It’s easy to think of TransUnion as a stodgy, credit reporting agency but Chaouki described how the company both thinks and acts at the speed of fintech. As for the final panel on portfolio algorithms, it was either conference fatigue or a genuine lack of relevant information but I found little to do with fintech in the discussion.
The Kellogg Fintech event was held in the brand-spanking new Global Center on the Northwestern campus in Evanston and there was something about the size and scale of the place that threw me off. I happened to strike up a conversation with a former CBOT trader during one of the breaks and he said that the Global Hub took him back to the day in the late 1990’s when he first learned about Globex, the CME’s electronic platform for futures trading. At the exact same time, the CBOT voted to build their gargantuan, new trading floor. “With e-learning on the rise,” he mused, “is building a Global Hub like this a good idea?” We shall see.
Chicago as a Fintech Hub
Chicago’s sudden and surprising emergence at the #5 spot on the global fintech list is a testament to hard work of the likes of Barchart, 1871, and, most directly and explicitly, Jason Henrichs and the folks at FinTEx Chicago. However, it seems that there is still a long way to go. Chicago is known as a trading community but there is much more going on in financial services in the area, with established companies like Morningstar in investments, Discover in credit, and Aon and others in insurance, not to mention dynamite innovators like Avant Credit and Enova. One should expect that Fintech Week will be back bigger and better in 2018.